Friday, February 28, 2014

“I
hate you!” is an epithet that has been uttered by virtually every child, at some
point, toward their parent, especially towards those who are rigorous when it
comes to discipline. Parents who enforce rules do not do so because they want
to punish their child; they do so to teach him or her right from wrong, and to
point out that such rules allow households to operate more smoothly. Teachers
do not discipline students because it makes them feel good, but for the betterment
of the student. Rules are to be obeyed. Police in New York did not “stop and
frisk” because they were targeting specific groups; they did so because they were
trying to lower incidences of crime. Obviously, at all levels there are
exceptions – bad parents, bad teachers and bad police – but the majority has
the interests of their charges in mind. The role of a disciplinarian is not to
be popular, but to allow society to function. If they do their job well, they
will be respected.

We
establish governments so that civilized people can live in harmony, to bring
order to what otherwise would be chaos. It is why free people choose to live
under a code of laws. When rules are known, understood to be fair and unbiased
and enforced we feel safe, and freedom can flourish. While we don’t always like
to admit it, dishonesty and corruption are common characteristics, perhaps not
of most people, but certainly of a sizable minority. Why else lock our offices
and stores at night, our homes when we are away and our cars when we leave them
even for a few minutes? As disillusioning as it might be, there is no Eden beyond the garden
gate.

The
world is like the family, the school, the village or the nation only on a
larger scale. Our mutual interests are global. Commerce requires that ship
lines be secured, that airspace be protected, that truck load-factors be
adhered, that cyberspace be secure, and that international laws be obeyed. The desire to do harm is omnipresent. Someone,
or some entity, must assure that goods and people can move freely. For
forty-five years following World War II, that role fell to two nations, the United States and the Soviet
Union – in an unwritten “balance” of power. Threats of mutual
destruction kept the fingers of leaders of both nations off the button that
would have led to total annihilation. However, one country represented
totalitarianism and darkness; the other, democracy and freedom. When the Soviet Union collapsed, some, like Francis Fukuama,
predicted “the end of history.” While Professor Fukuama was wrong and history
did not end, the world was fortunate that the United States won.

“If
wishes were horses, beggars would ride” is an old English proverb that it is
useless to wish for something impossible. Man has never lived in peace. All men
are not good. Many are evil. The world has changed from the Cold War days when
we knew who the enemy was. Threats now come from smaller rogue nations,
governed by heartless dictators whose only desire is power, and from stateless
terrorists aided by rogue nations. Some of the former now have nuclear weapons.
The assuredness of mutual destruction is not meaningful to them as their stake
in the current global economy is small. The latter have no stake in the world
as it is, so the death of a suicide bomber is considered an honor. They believe
that the giving of their life to their cause is noble – that forty virgins await
them. Thus threats are more difficult to discover and stop, making them more
lethal, and more probable.

There
are many on both sides of the political aisle, including President Obama, who
do not feel that policing the world should be our responsibility. There appear
to be five principal arguments against such a role for our country. Added are my
responses:

1)There is no
political will. It is too tough politically. We have been through twelve years
of war with little discernable success. Americans want the troops home. Anti-Americanism
is rampant through much of the world, especially where we have deployed forces.
Exiting Iraq and Afghanistan, as
we did (or are doing), has left them more dangerous than they were a dozen
years ago. A nuclear Pakistan
is in free fall. Iran
is more dangerous than ever. Syria
is attracting al Qaeda and other terrorists. Egypt has become a hotbed of
anti-Christian sentiment. The will must be found.

2)It is too
expensive. Our infrastructure is crumbling and we have more people on food
stamps than ever before. How will it be paid for? We need the money here. Certainly
there is fraud and waste in Pentagon spending, but all that talk begs the far
more serious question of entitlement spending, which threatens to bankrupt the
nation in a generation or two. A key responsibility of government is to keep
its people safe. So, what are the costs of doing nothing? We may find out with
this week’s decision to reduce troop-strength to pre-World War II levels.

3)Are we capable?
What size army would be needed? Can we adapt to myriad cultures and languages
that would be necessary to be successful? No one knows for certain, but we are
a nation of immigrants from around the world. Collectively, we should have
comprehensive understanding of foreign cultures.

4)Nobody asked us.
This is silly and irrelevant, in my opinion. Who would ask us? The Russians,
Chinese, or Iran?
Members of al Qaeda? The UN, with its General Assembly dominated by Muslim
nations and a Security Council with morally bankrupt nations like Russia and China having a veto? One doesn’t
get asked for this type a role. It devolves upon one. There is no other nation
that can do so.

5)We shouldn’t have
to bear the responsibility and costs alone. Ideally, we should not have to.
But, if we accept funding from other nations, might that not restrict our
ability to respond quickly and effectively? To those that see the United States
as evil, I understand the reluctance. But has there ever been a nation – with
all of its faults – that has put the greater good above its selfish interests?

The
arguments against have populism and sentiment on their side. It is easier to
justify retaliation against an aggressor, than to explain the need for
preventive forces. But even those who do not see us as the world’s policeman do
not deny the need. The world is dangerous. I was taken with Niall Ferguson’s
recent observation, which I remarked upon earlier this week, that the number of
killings due to armed conflict in the Middle East was greater in 2013 than in
any year since the Strategic Studies Armed Conflict database began in 1998.
That means more people died last year in the Middle East because of armed
conflict than in any of the years we were fighting in Iraq and Afghanistan. Just because casualty lists
don’t get printed in the American press doesn’t mean people aren’t dying. That
fact alone should send a chill up the spine of any doubters. President Obama,
in 2009 in Cairo,
said he would bring a new understanding of and respect for the Muslim world. Instead
he has witnessed more death and destruction in the region than happened under President
Bush.

Given
the current environment, and President Obama’s objection to the U.S. being the
world’s policeman, it seems likely we will walk away from that responsibility. It
is a decision, I believe, we will come to regret. Nations can no more function
without a global police force than can families, schools, or villages without
disciplinarians or cops. The bad guys, over time, will gain the upper hand. We
will then respond, but it will be late, violent, quick and discombobulated. It
will do little to prevent future violence, and our costs will be higher. A
police force does not have to be loved, but good ones are respected, as are
their equivalents in homes and schools.

At
some point a political leader will emerge with the moral courage to do what may
be unpopular, but what would be right for the world. Until then terrorism will
proliferate and people –Americans included – will die. The world does need a
policeman. It would be pleasant if we could all live in harmony, and it would
be nice if it were a police force comprised of many nations, but that seems
unlikely and unworkable. So, until another country becomes more powerful than
ours – which will happen at some point – the only nation capable is the United States.
It is our responsibility. Avoiding it will help give rise to a reinvigorated Russia and a resurgent China. Would
you prefer that Russia or China assume
the role? Shunning responsibility now will not make the world a safer place.

Wednesday, February 26, 2014

The
S&P 500 Index closed at 805.22 the day Barack Obama was inaugurated as
President. On Friday the Index closed at 1836.25, for a gain of 128% over the
past five years, reflecting an annual compounded gain of 18%. Why, then, do so
many, including me, feel his policies are bad for the economic well-being of
the country?

Over
the same time frame – the five years of the Obama Administration – the prices
of other asset classes rose as well. Gold (a harbinger of concern) is up 55%,
crude oil (which we have in abundance) has risen 164% and copper has doubled.
The CBOE Index has more than doubled. Corporate bonds have done exceptionally
well, with the yield on High Yield bonds being roughly one third what they were
on January 20, 2009. Somewhat contradictorily, the yields on Treasury Bills are
half of what they were when Mr. Obama took the oath of office in January 2008.
The principal culprit for the rise in asset prices has been interest rates that
have been kept exceptionally low by an accommodative Federal Reserve. The
consequence is a schizophrenic market, with a mixture of worry and speculation
manifested in the rise in the prices of stocks, high yield bonds, gold and oil,
while risk aversion is also very much alive, reflected in the exceptionally low
yields on short term Treasury Bills.

We
all know, of course, that the economic recovery has been feeble and that
federal debt is considerably higher than it was five years ago – $5 trillion
(or 30%) more today than it was at the end of fiscal 2009.
The biggest problem for the economy has been a lack of jobs. While the stated
unemployment rate has declined, the more meaningful number, as it actually
reflects people working, is the labor participation rate, which has declined
from 65.7% in January 2009 to 63% in January 2014, according to the BLS. Each
one percent reflects about 1.5 million workers. Average incomes are lower than
they were before the recession began. Total employment, as mentioned above, has
declined, and income and wealth gaps have widened.

Despite
a plethora of Fed-drive quantitative easing programs, the yield on longer term
Treasuries has risen, indicating that prices have fallen. For example the yield
on the 30-Year Treasury has risen from 2.97% on January 20, 2009 to 3.71% today.
At the same time, the dollar has declined 5.5% against a basket of currencies,
meaning owners of bonds will be receiving less valuable dollars on maturity.

As
for debt, low rates have encouraged borrowing. Individuals borrow so that they
may enjoy today something they are willing to pay for over time, such as cars
or a home. They also borrow for education on the expectation that such an
investment will yield higher returns over time. Total student loan debt, at
over $1 trillion, has now reached frightening levels. Credit card debt is also
again becoming a concern. According to a study by the Corporation for
Enterprise Development, 30% of Americans have more credit card debt than
emergency savings. And the U.S. Department of Commerce said that the savings rate
fell to 4.2% in November of last year. The assumption of more debt doesn’t
square with Gallup’s
Economic Confidence Index which is negative in all fifty states, suggesting
concerns about the future. Unsurprisingly, the poll is only positive in the District of Columbia –
home to a bloated federal government bureaucracy and the thousands of lobbyists
that serve it.

Businesses
traditionally borrowed to invest in capital projects that are expected to
produce higher returns. However, in recent years, as corporate management
became more focused on option-based compensation than the longer term
requirements of the business, companies have borrowed or used cash flow to
repurchase stock, rather than investing in the business. According to LPL
Financial, fifteen years ago companies spent more than 40% of available cash
flow on capital investments. That had fallen to 25% by 2007, suggesting little
confidence because of myriad regulations and high corporate taxes. Corporate
debt during this time has been modest.

Government
debt has been the biggest problem, though it has the advantage of being able to
repay its obligations in a depreciated currency, which in fact it has done for
decades. Historically, governments borrowed for capital projects – military
equipment, highways, dams, etc. – and other opportunities like the acquisition
of open-space, and to fund wars. The advent of entitlements has meant that
government must carry on their books obligations for future services, limiting
its ability to fund necessary infrastructure projects. Taking a page from the
Keynesian playbook, the Obama Administration initiated and signed a $787
billion stimulus bill (the American Recovery and Reinvestment Act of 2009) in
February 2009.

Regardless
of its uses, debt represents an obligation that must be repaid; though rules,
which protect debtors at the expense of creditors in the case of bankruptcy,
have made borrowers less respectful toward their obligations. For example, the
ill-treatment of General Motors creditors in 2009 indicated a violation of
contract law.

Corporate
earnings, as measured by the S&P 500, rebounded from their cyclical lows of
$49.51 at the end of 2008 to $107.45 at the end of 2013. In part, that can be
attributed to stock buybacks, but the more important component was a natural
rebound. Earnings in 2008 had come down sharply from the $82.54 registered in
2007. Between 2007 and 2013, corporate earnings compounded annually at 4.49%,
while stock valuations grew at 3.9%. The rise in earnings has not been
accompanied by a concomitant rise in sales. Greater efficiencies, including
cuts in employment, have helped drive earnings growth. “Ultra-low interest
rates,” as James Grant wrote in his most recent publication, “constitute a
standing invitation to substitute capital for labor…” Despite the rise in
earnings, companies have been notably reluctant to invest; so that now about
$1.5 trillion sits on corporate balance sheets, and another estimated $2
trillion sits overseas waiting to be repatriated should tax laws be remedied.

The
rise in stock prices and the policies both proposed and undertaken by the
Administration are unrelated. Timing is critical. Stocks had peaked in October
2007. A confluence of events: a recession that began in December 2007 that
lasted until May 2009; a burgeoning credit crisis that began in 2007 and that
risked becoming a full-fledged financial crisis in the fall of 2008, and
stretched valuations. These factors caused the stock market to fall by 58%
between October of ’07 and March of ‘09. By the time Mr. Obama took office,
stocks, as measured by the S&P 500, were already down 49% from their peak.
In fact, stocks were then 25% below where they had been ten years earlier.

Mr.
Obama’s defenders give him credit for the economy exiting recession in the
spring of 2009. But it is hard to argue that a stimulus package that passed
Congress in mid-February would be responsible for a recovery than began three
months later. Very little of the money – if any – had been spent by the time the
recession ended. Likewise, the worst of the credit crisis occurred in
September-November 2008. The TED spread, the difference between Three-month
Treasury Bills and Three-month LIBOR and considered a measurement of banks’
willingness to lend, had reached an all-time high of 465 basis points in
mid-November. By the end of December, the spread had declined to a still-high
131 basis points. The credit crisis was largely resolved by the time Mr. Obama
took the oath of office.

No
one knows how much longer equity prices will move higher without a meaningful
correction. While fundamentals, over time, determine prices, we have become an
ADHD nation. Fifty years ago, when I entered the business, stocks were held an
average of eight years. By 2010, the average stock was owned for five days.
With High-Frequency trading platforms accounting for 70% of total trading
volume, average holding periods have no doubt shrunk in the past four years.
The worrying unknown is that with so many shares being traded by those who look
only at symbols and price movements the possibility of much more volatile price
movements has increased, as can be seen by looking at daily charts of stocks
like BBBY and BBY. Nevertheless, market volatility, whether measured by the VIX
or by days in which the market moves up or down by more than 1.5%, has receded.
But markets can change quickly.

Mr.
Obama sees government as an instrument for good, which in itself may be okay,
but when taken to an extreme distorts equilibrium. Instead of relying on
legislation, he chooses to issue executive orders. He has added virtual
dictatorial powers to the Environmental Protection Agency; he has used the IRS
for purposes of political intimidation; he lied about events in Benghazi
because they did not accord with his campaign statements, and he has had his
Attorney General urge state’s attorney generals to defy laws they personally
feel are discriminatory. Where will such an aggrandizement of power stop?

What
is missing in all that Mr. Obama has done is the provision of confidence. In
increasing dependency, the Administration has destroyed the concept of personal
responsibility, and responsibility and confidence are linked. We see a lack of
confidence in consumer poll numbers. We see it in the unwillingness of
businesses to invest and hire. We see it in the way in which other nations view
us. We see it in investors who forsake the long term for the short. Without
confidence, it is difficult for a nation, a company or an individual to prepare
and build for the future. Confidence does not come from giving things to
people, it comes from a belief that one can provide for oneself.

Whither
markets? In 1994 Jeremy Siegel, in his 1994 classic Stocks for the Long Run,
looked at 200 years of investing history and determined that stocks had gained
between 6.5-7.0% per annum, after inflation. Not having so many years to look
back upon, I only went back 46.5 years, to September, 1967 when I came into the
brokerage business. The DJIA have compounded annually at 6.3% since then,
providing no clear message as to whether stocks may be under or over valued –
not that anyone should pay much attention to such simplistic analysis. Whither
markets? I have no idea, but until we rebuild ours and our nation’s confidence,
it is difficult to assume that the years ahead will be better than the ones
behind.

Monday, February 24, 2014

Just
over 200 years ago, Immanuel Kant noted that a republic was best situated for
perpetual peace. The reasons were simple: a republic requires the consent of
the governed to enter war; the people must pay all costs, and are required to
repair any devastation left in its aftermath. On the other hand, when a country
is governed by autocrats, “a declaration of war is the easiest thing in the
world to decide upon.” Princeton PhD candidate, Raymond Kuo made the same
observation three years ago. “…the leaders of two democracies tend not to
attack each other, as they are both constrained by publics which would prefer
not to bear the costs of war. Autocracies lack these constraining effects, and
so go to war more often.”

That
concept is why it is in the world’s interest that Ukraine becomes a free and
democratic state, in actuality, not just in name. In contrast, from Vladimir
Putin’s perspective it is important that Ukraine be a malleable vassal-state
in the empire he is attempting to rebuild.

But
peace in a world as unstable as ours is not possible without a global enforcer,
a responsibility that lies with the United States. For most of the
post-war years, the world lived with a balance of power, but that ended in
1991. In Saturday’s Wall Street Journal, Niall Ferguson quoted Henry
Kissinger. “The balance of power is the classic expression of the lesson of
history that no order is safe without physical safeguards against aggression.”
As the default “balancer,” the United
States has an awesome responsibility. It must
maintain a strong military presence and must exhibit the moral courage to
enforce its stands. When we walk away from such responsibilities violence
erupts. In 2013, as Professor Ferguson noted in his column, 75,000 people died
in the Greater Middle East as a result of armed conflict. That was the highest
number since the International Institute of Strategic Studies Armed Conflict
database began in 1998 – higher than during the Iraq
and Afghanistan
wars. Walking away from Iraq
and Afghanistan
has not reduced violence. Ignoring the self-imposed “red line” has not reduced
casualties in Syria.
Shrinking the U.S.
army to the smallest force since before World War II, as Defense Secretary
Chuck Hagel has proposed, seems a foolish and risky proposition.

Wherever
and whenever political leaders have assumed excessive power (whether democratically
elected or not), violence and revolution are the consequence. The people in Ukraine caught a rare glimpse of freedom with
the collapse of the Soviet Union in 1991 – Russia had essentially been their
master for the previous 350 years. But it proved ephemeral when Viktor
Yanukovych, a disciple of Russian president Vladimir Putin, was elected
president in 2010. Shortly thereafter, he had his political nemesis Yulia
Tymoshenko jailed on drummed-up charges. While eastern Ukrainians, which includes
the CrimeanPeninsula,
have much closer ties to Russia
than those in the western regions, most Ukrainians are anxious to get out from
under the boot of Russia.
Putin, on the other hand, wants to restore Russia to its Tsarist and/or Soviet
past.

But
to understand why so many Ukrainians are willing to die that freedom might live
requires a quick review of Russia’s
historical relationship with Ukraine.
That history also helps explain why Putin is so determined to keep Ukraine within
the Russian orbit. The eastern part of Ukraine
– east of the DnieperRiver – has been in
Russian hands since the mid-17th Century and Russian, as well as
Ukrainian, is still spoken. The western part of the country spent many years as
part of Poland
and, later, part of the Austria-Hungarian Empire. Galicia,
a western province of Ukraine, only became part of the USSR after
World War II. The CrimeanPeninsula, like the
eastern regions, has long been populated with Russian ex-pats. In 1920, after a
brutal civil war, Ukraine
became a SovietRepublic. In 1932, Stalin forced a
famine on the Ukrainian people. Between 5 and 7 million people died, or 15-20%
of the nation’s population. Stalin’s
purges in the late 1930s murdered more. Balaklava, now part of the Crimean city
of Sevastopol
and where Yanukovych was last seen, is the scene of the famous Charge of the
Light Brigade against the Russian guns in 1854. And, of course, Yalta, a Crimean resort town on the Black
Sea that for three years had been occupied by the Germans, was
where Stalin met Roosevelt and Churchill in February 1945.

Sevastopol is Russia’s
one warm-water port and is home to their navy’s Black Sea Fleet. That naval base has a great meaning to Russia, as it
was established in 1783 by Catherine the Great. It became part of Ukraine in 1991.
A “Treaty of Friendship and Cooperation between Russia
and Ukraine” was signed in
May 1997, which allowed both countries to maintain fleets at Sevastopol. However, the Ukrainians in 2008
made it clear that the Russians must leave when the treaty concludes in May
2017. There is no question that Mr. Putin does not want to be held responsible
for the loss of Sevastopol.

The
breakup of the Soviet Union in 1991 set the
stage for former Soviet satellites to remove the yoke of Soviet Communist domination.
Many nations have made the transition, including Poland,
the CzechRepublic,
Romania, Estonia, Latvia,
Lithuania, Hungary and East
Germany, but others like Georgia
and Ukraine
have felt the heavy foot of Mr. Putin. In 2008, at his last NATO summit as President,
George W. Bush urged that Georgia
and Ukraine
be welcomed into a Membership Action Plan (MAP) that prepares countries for
NATO membership. However, Western European nations objected, for fear of
upsetting Russia
and Mr. Putin. Newer members of NATO – including those bordering Ukraine, like Poland,
Belarus, Slovakia, and Romania, who understood what it
meant to live under Soviet domination – supported Mr. Bush. It may have been a
case of historical amnesia that allowed the West to ignore people struggling
for democracy, but I suspect it had more to do with an absence of strong Western
leaders, those with the moral compass of a Margaret Thatcher and Ronald Reagan.

When
trade agreements were offered by the EU last November, Ukraine
president Viktor Yanukovych, under pressure from a strengthened Mr. Putin and
an offer of $15 billion, refused, setting off demonstrations. Six years after
that NATO meeting where European leaders weaseled out of doing the right thing
for the Ukrainian people, the European Union, the Obama Administration, and
mainstream media are finally coming to understand that there is a crisis – that
Putin’s Russia means to establish hegemony over the southern regions of the
former Soviet Union and that a timorous West will not stop him. Mr. Obama’s
response was that there would be “consequences” if Ukraine’s president did not
back off, though his remarks were diluted by requesting that the protestors act
“responsibly,” either ignoring or confusing Barry Goldwater’s maxim that
“moderation in the pursuit of justice is no virtue.”

It
could be that the Friday meeting with three EU foreign ministers and a Russian
envoy may have averted the crisis from getting worse. The disappearance of Mr.
Yanukovych and the releasing from prison of Ms. Tymoshenko are certainly
favorable developments. But I suspect the Russians will not retreat so quickly.
No one can predict what will happen. Mr. Yanukovych, before he fled, promised
to form a coalition government and to hold general elections at the end of 2014,
rather than 2015. But, he is a puppet of Mr. Putin and cannot be trusted. Even
Ms. Tymoshenko cannot divorce herself from Russia. Mr. Putin sees himself
sitting in a position of strength, facing Western ambivalence and leaders who
have lost their moral sense.

The
consequence of Western ambivalence toward despotic leaders, whether they be in
Syria, Venezuela, Iran or Ukraine, is not helpful for people struggling to be
free, nor is it propitious for world peace. Such hesitation makes the world
less safe.

Thursday, February 20, 2014

Walking
across the marsh and down to the river in a driving snowstorm a week ago, I
marveled at the power of nature. There is nothing that man has devised that can
head off a meteor, hurricane, tornado, typhoon or snow storm. We have split the
atom, placed a man on the moon and can send messages from one computer to another
in milliseconds, yet we can’t divert rain from where it falls in abundance to
where it is needed. Despite the bleatings to the contrary from those like
Secretary of State John Kerry in Indonesia three days ago, man, as powerful as
he is, has been no more successful at trapping nature than was King Canute 1000
years ago. As Professor Mat Collins, a senior scientist associated with the
UN’s Intergovernmental Panel on Climate Change, said this past weekend about
the storms and flooding in the UK: they were driven by the Jet Stream moving
south “for reasons that are simply unknown…If this is due to climate change, it
is outside our knowledge.”

President
Obama recently blamed the droughts in California on global warming – placing
blame on fossil fuels. He responds by unilaterally ordering the development of
higher standards for truck manufacturing, rather than re-routing water his EPA
had earlier diverted from California farms so that the Delta smelt might live.
We may want all species to survive, but food should come first.

Ironically,
much of the East Coast has experienced snowier and colder winters than normal. Apart
from winter sports enthusiasts, most people are getting tired of the ice and
snow; they long for spring. Depending on the town, Connecticut schools have
been closed 6 or 8 days so far this school year, meaning that summer vacation
will be shortened by a like number of days. USA Today reported last week
that since December 1st, 75,000 domestic airline flights had been
cancelled. Yet John Kerry, Al Gore and Barack Obama have the arrogance to
believe that man is more powerful than nature – that responsibility lies with a
small number of Republicans and a few evil oil and gas producers. It is not
enough for them to acknowledge that, yes, man does leave his imprint on the
natural world, which is the opinion of every sensible person. But they insist
that if man would simply adhere to policy recommendations of elitist Washington
bureaucrats the world would remain as it is – the oceans would recede, storms
would subside, temperatures cool and polar bears would no longer be seen riding
ice floes into the sunny regions of Michael Moore’s camera. Tempus cessat.

Of
course, it is not just arrogance; there is the pragmatic side. Perpetrating the
idea that global warming is solely the responsibility of man has made millions for
Al Gore; though he wasn’t above selling one business (Current TV) to
fossil-fueled Al Jazeera. President Obama has lifted cronyism to heights never
imagined by his predecessors, in having taxpayers send billions of dollars to
his supporters at businesses like Solyndra and Fisker Automotive (both of which
went down the rat hole). The President refuses to approve the Keystone XL
Pipeline, despite recent rail accidents suggesting that not only would the
pipeline be environmentally sounder, but would save lives and property as well.
And John Kerry sounds like a delusional member of the “know nothing party,” a
companion organization to the “flat-earth society,” the latter being a group
which includes as members all who question any of his pronouncements.Forsooth! Damn the costs! Let them drive
hybrids, as a composite of Shakespeare, David Farragut and Marie Antoinette might
have said!

As
predictable as spring following winter, Democrats, when the going looks rough,
trot out climate change as an issue to divert attention from myriad foreign
policy failures, a feeble economic recovery and the troublesome aspects of
ObamaCare. Democrats sense such a diversion from the real world will “gin up”
support for troubled candidates, especially from their base of academics and
elitist members of the gentry. ObamaCare has not been the roaring success we
were told it would be. We did wait, as Nancy Pelosi so astutely warned us we
must, until it was passed to see what was in it. And we found it was different
from what had been promised. Someone lied about doctors and insurance policies we
could keep. It was not easy to enroll. It was not cheaper or better than other
healthcare plans. It will, according to the CBO, cost somewhere between 2.0 and
2.5 million full-time jobs. Its annoying rollout has put Democrats at risk; so they
needed the conversation to change. What could be better than sending Mr. Kerry
to Indonesia? There he stated, incredulously, that climate change was possibly “the
world’s most fearsome weapon of mass destruction.” He then added, for good
measure, that “the science [man being responsible] was unequivocal” and that
opponents were simply “burying their heads in the sand.” He might more accurately
have said he was immersing his listeners in piles of orally produced bovine
excrement.

Like
much of Democrat blathering, there is a kernel of truth in what they say,
though – man certainly has had an impact on the environment, as all plants and
animals do. Admittedly, man has probably had a greater effect than even – let’s
say, for example – the coyotes in my neck of the Connecticut shore have had on
the deer population. But the religious-like fervor that feeds those like Obama,
Kerry and Gore fail to acknowledge that the planet, over its 4.5 billion years
of existence, has warmed and cooled on thousands of occasions, and did so long
before man arrived. Their stubborn adamancy toward politically-motivated policy
responses deflect from the far more urgent need to prepare for (or at least be
alert to) natural catastrophes for which one cannot assign blame.

The
earth’s climate is in constant flux; some changes could be cataclysmic. No one
can predict exactly how the environment will change, only that it will. There
is much in nature we do not know and for which we cannot plan. For example, on
Monday an asteroid the size of three football fields and almost 900 feet in
diameter had a “close brush” with earth, passing within 2 million miles, at
27,000 miles per hour. Two million miles sounds like a long distance, but at
the speed it was traveling the asteroid would have hit earth in a little over
three days. To determine the damage that an impact from an asteroid of that
size could have caused, we can look back a year at the asteroid that exploded
18 miles above Siberia. The size of that one was less than one tenth of this,
yet scientists estimate its explosion was equivalent to 20 atomic bombs.

None
of this means we should not act in our best interests, to live as much in
harmony with nature as is reasonable. It is far more pleasant to do so. But we
must keep in mind that an estimated 800 million people live without knowledge
of where their next meal will come, and that almost 1.5 billion people live on
less than $1.25 per day. Saving the environment is not of importance to these
people. Food and shelter is. When we take steps that sound good in theory, but
which raise the price of food, fuel and shelter, we do more harm than good.

Again,
I would suggest that the next time a storm comes by – a hurricane, tornado,
typhoon, thunder storm, or even a good old nor’easter – walk outdoors (if you
can) and consider: has man ever produced anything so powerful? Democrats have
spent years convincing themselves that, like Snow White, they are the fairest
in the land. They consider themselves smart and highly educated; so they assume,
as the ruling class, they know what is best for the proletariat. Many dwell on
the coasts where the problems of Middle America are something to be seen in
movies (made, of course, by Lefties), or which they pass over at 35,000 feet.
Knowing that we don’t know everything is the first part of wisdom. J.R.R.
Tolkien, in The Fellowship of the Ring, has Tom Bombadil, “the Master of
wood, water and hill,” explain, “I am no weather-master, nor is aught that goes
on two legs.” So true, but sadly, those
like Obama, Kerry and Gore lack such humility and wisdom.

It
is jobs that people care about, or rather the lack of jobs that characterizes
this recovery, now five years old – the same length as Mr. Obama’s Presidency.
It is a sense of dignity and self respect that comes from having a regular
paycheck that is missing in America. We have lost our confidence and our belief
in ourselves and in the future. It is not that our forbearers had an easier
life. They did not. But they were not shackled by a growing dependency that
destroys self reliance and self esteem. And they, too, lived in a volatile
world.When we hear John Kerry call us “deniers,”
we can accept that, but with the understanding that we do not deny that climate
changes; we are deniers of his wisdom, of his conceit that he and those like
him have the answers.

Tuesday, February 18, 2014

Three
people died in riots in Caracas last Thursday. Venezuelan President Nicolás Maduro
predictably blamed the deaths on “neofascists financed by the United States.” Nothing
was said about empty shelves in stores, food shortages, or an inability to buy
a car, gasoline or toilet paper. The accusation was apparently made without irony
and absent any appreciation for the fact that Maduro’s (and Hugo Chavez’s)
political party, the United Socialist Party, exhibits many of the characteristics
of “old-fashioned fascism,” including the National Socialist Party of 1930s
Germany. While Maduro doesn’t have Hitler’s “brown shirts” (or at least not
visibly) and, apart from Americans, has not yet singled out a particular group
for blame, the economic consequence of his policies have been to deprive the
people of the basic necessities of life.

It
is unsurprising that a man who surrounds himself with Communist allies like
Cuba, China and Russia, as does Senor Maduro, should invoke Fascism as evil,
while inferring that Communism is good. In truth, they are not at polar ends of
a linear political spectrum. The spectrum is circular, not horizontal, with the
two political beliefs intersecting on the side directly opposite democracy.

Communists
are more subtle than Fascists, in that they use words like “reform” and they claim
to address inequality; thus are more widely accepted in the West. Yet, both
communists and fascist are murderously indiscriminate toward those considered
enemies. The number of civilians killed by Stalin is estimated to be north of
20 million, probably more than were killed by Hitler. Both men suspended the
rule of law and they eliminated dissenters. Both thrived on hatred and divided
their people, isolating a segment of their citizens on whom to pin blame. For
Hitler, it was Jews; for Lenin and Stalin, it was the aristocracy; for Castro, it
was plantation owners. In Venezuela, an informal militia roams cities and towns
on motorcycles intimidating political opponents. They may not wear brown shirts,
but they derive from comparable ideologies.

The
consequence of Venezuela’s Socialism has been a decline in economic well-being.
In the fourteen years that Hugo Chavez ruled, the Venezuelan bolivar shrank 87%
against a weak U.S. Dollar. (During those years, the U.S. dollar declined about
20% versus a basket of currencies.) In the ten months that Nicolás Maduro has
been president, prices have risen 56.3%. And that includes a few weeks of
forced price cuts ahead of local elections last November. The discrepancy
between official exchange rates and black market rates has widened. A U.S.
dollar costs 70 bolivars on the black market, while the official rate is 6.3. The
experience in Venezuela provides a lesson in the consequences of unrestricted state
intervention. Mary Anastasia O’Grady wrote last December about Venezuela in the
Wall Street Journal: “Heavy state intervention was supposed to produce
justice for the poor in the breadbasket of South America… [Venezuela] is an
instruction manual on how to increase human misery.” The bottom line is that
the Country has produced riches for the governing classes, poverty for the
middle classes and even greater poverty for the already poor.

Venezuela’s
collapse did not come about because of an absence of natural resources, but in
spite of them. By most counts, Venezuela has the largest proven oil reserves in
the world. Forty years ago they had the highest standard of living in Latin
America and the 4th highest GDP per capita in the world. Today, the
country is virtually bankrupt. A professor from John Hopkins recently put the
implied rate of inflation for 2013 at 297%. In terms of property rights, the
Heritage Foundation gives Venezuela a five on a scale of one to a hundred, and
ranks the country 175th – between Eritrea and Zimbabwe – on a basis
of economic freedom. Last week, Toyota and General Motors announced they were
shuttering plants, putting 12,000 people out of work. Air Canada, American
Airlines and United Airlines, among others, have suspended operations in the
Country. The Heritage Foundation’s report said about Venezuela: “After more
than 14 years of ‘21st-century socialism,’ economic and political
freedom is nonexistent.” In my opinion, Venezuela’s United Socials Party is
proof of Adam Smith’s somewhat cryptic remark, “…that there is a great deal of
ruin in a nation.” In Venezuela that ‘ruin’ has been unmasked.

The
message from Venezuela is the speed and the perfidious nature with which
nations can go to ruin. Hugo Chavez, a “champion of the poor,” campaigned on a
platform of redistribution to combat inequality. However, under his leadership inflation
rose, the nation’s living standards declined, and poverty increased. Chavez muffled
dissension, abandoned civil rights and the rule of law. In doing so, he
destroyed his nation’s culture while generating a personal net worth of about
$1 billion.

A
nation’s culture reflects all aspects of its being. It should not be forced. It
changes naturally, almost imperceptibly, over many years. The culture of the
United States is one of individual personal responsibility and self-reliance. It
is manifested in our concept of limited government and in our individual rights
embedded in the Constitution’s Bill of Rights. It can be seen in our religious
freedom, in our schools, in the belief that every person should have an equal
opportunity to succeed and that no one is above the law, that legal contracts
be honored and that property rights are inviolable. We are a nation of
immigrants who have come to this country largely to improve our lives and to
live freely, not to substitute one paternalistic dictator for another. Our culture
is a compaction of our predecessors and their ideas. It is us. The destruction
of a nation’s culture destroys that nation.

We
are a caring and generous people, who give more to charity than any other. But,
insidiously and almost invisibly, our government has been assuming
responsibilities men and women harbored for decades, so that participation in
community service organizations has declined for years, a development well described
by Robert Putnam, in his 2000 classic, “Bowling Alone.” The stated intent of
those who would expand the reach of government is benevolence and equality, to
make life easier for those who are the most unfortunate. The effect has been
greater dependency and less community involvement, along with reduced economic
growth and declining middle class incomes.

In
his State of the Union, President Obama was not bashful about governing
unilaterally, when he felt the need. Executive orders and administrative rules
are permitted under our Constitution, but they are not supposed to substitute
for legislation, the exclusive purview of the Congress. (In similar manner, the
Left would have the Supreme Court assume a more activist role; for example
defining marriage, rather than allowing the people to decide through their
state legislatures. Is the opinion of nine individuals more sagacious than the
collective wisdom of 200 million voters?) The Environmental Protection Agency’s
attack on the coal industry was a politically motivated act to advance an
agenda that it is doubtful that Congress would have approved. What legislator
would have voted to impose mandates on an industry, the consequences of which,
by the Administration’s own calculations, will be to raise coal prices 70-80%?

That
usurpation of power was silently acquiesced to by most in mainstream media,
because it was for a cause they support. But in doing so, they set a precedent
that will return to haunt them. The question should always be asked of those
who allow such power grabs – does the end justify the means?

Freedom
is not elastic. It is finite. We are all willing to give up some element of
freedom to live secure from enemies, eat foods that are deemed safe, drink
water that is pure and take medicines that do what they are supposed to do. The
debate, as it has always been, is about how much freedom are we willing to
forego for how much security and safety we expect to obtain. Whenever the EPA
issues a new mandate, some element of freedom is lost, but its loss is never
explained or quantified. It is why laws should be enacted by Congress, so they
can be openly debated and resolved in a manner that satisfies the majority. The
Left is willing to give up more freedoms than the Right, and they are more
likely to further their interests by imposing their will through executive
actions and court decisions.

The
path toward more government in our lives and the greater dependency that
implies does not necessarily mean we will become a nation of Eloi, or that we
are on a road to serfdom, to borrow the title of Friedrich Hayek’s book, or that
we will become a Socialist state like France. But it does mean we are traveling
in that direction, a fact that should be acknowledged by everyone, regardless
of political bent. A benevolent dictatorship, a wag once stated, is the best
form of government there is. But whose definition of benevolent should we use,
yours or mine?

These
are the lessons from the events unfolding in Venezuela. “It Can’t Happen Here”
was the title of Sinclair Lewis’ 1935 novel based on the rise of National
Socialism in Europe at that time. It may be unlikely and it certainly would be
unexpected, but it can happen here. Freedom, which is fragile, and opportunity,
which should be robust, begin with education. It is ironic that many Democrats
who favor choice for women deny choice for the poor when it comes to public
school education. Obeisance to teacher’s unions trumps opportunity for
inner-city children. Disallowing charter schools and vouchers is a way of removing
choice – of bending to self-interest, rather than in doing what is right for
the people.

A power-hungry,
populist President, one who divides the people into categories like the 1% and
the 99%, is a politician to fear, as is a man capable of subverting lies into
truths. Using the IRS to silence opponents should send a chill up the spine of
every freedom loving person. These are the things which we must guard against,
as the omnipotence of the state becomes more ubiquitous. These are the lessons
from Caracas.

Friday, February 14, 2014

Speaker
of the House John Boehner decided to go against many of his Republican
compatriots by having the House vote to increase the nation’s debt ceiling,
without any conditions. The tally was 221 to 201, with only 28 Republicans
voting with the majority. The move was necessary, however, because Republicans
had lost the tactical campaign of using the threat of a government shutdown in
their war against the nation’s rising tide of debt. The quid pro quo was that
this should allow Republicans to focus on the disastrous rollout of ObamaCare, a
law which has thus far seen at least 27 “administrative” changes since passed
by a Democrat Congress and signed by a Democrat President in March 2010. Mr.
Obama’s unprecedented use of executive actions will be rued by Democrats when Republicans
retake the White House, as is inevitable.

Senator
Ted Cruz came close to de-railing what John Boehner had achieved. In demanding
that the debt ceiling bill in the Senate be passed with a super majority, he
forced ten Republican Senators to vote with the Democrats. Had they not, Harry Reid would have declared a
recess and the next two weeks would have been filled with reports of how
Republicans were intent on shutting down government yet again. There was a
time, perhaps, when the debt ceiling symbolized unsustainable government
spending, but it has become symbolic – perhaps not fairly – of Republican
recalcitrance. It is the elections in November that are important, not the smug
satisfaction Mr. Cruz may get from pushing Harry Reid to the wall.

This
is not to suggest that debt is not a serious matter. It is. The campaign over
the debt ceiling and the ensuing government shutdown last fall was lost in part
because of a media that has little understanding of the financial stakes
involved if we continue on this path of profligacy, but most importantly
because politicians of both Parties can only see as far as the next election.
They live in a make-believe world, where they spend what they want and the
Treasury makes up any difference between what they spend and what they take in
by borrowing, courtesy of nations like China and thanks to a Federal Reserve
that has kept interest rates at exceptionally low levels. The consequences of recklessly
layering on debt will have, at some point, a sad ending, most likely in the
form of drastically higher interest rates and inflation.

It
must be remembered that there is no intrinsic value behind the dollar, apart
from the faith and credit of the U.S. government. Neither gold, nor silver, nor
copper nor real estate backs a single dollar that is printed. No members of
Congress or members of the Executive branch have pledged their personal assets
for the money they keep borrowing. We recognize that no economy in the world is
stronger than ours and no people as free. But the world doesn’t stand still,
and our economy has lost some of its “mojo.” Further, studies indicate that
economically we have become less free. What has been and what is will not
necessarily be. Democracy is fragile and relies on faith and trust, while the
economy depends on confidence that laws will be enforced and contracts honored.
Too many in Washington, in both Parties, assume the game will always go on.
But, like a juggler, balls must be kept in the air. Gravity, at some point, is
likely to win.

For
years, Americans have fed at the trough of deficit spending, aided by prodigal
politicians whose concerns for the nation entrusted to their hands are
secondary to their interests in the next election. With half of American
citizens receiving benefits while not paying Federal income taxes, a number of canny
Democrats have effectively enabled their next re-election. It is a vicious
cycle that once starts spinning is almost impossible to stop.

The
debt ceiling should be eliminated. It has become a political football. One’s
attitude towards it depends on where one stands. When George Bush was in the
White House, Nancy Pelosi and Barack Obama voted against raising the debt
ceiling. Now they claim Republicans are being willful. Bickering over it
detracts from the basic problem that we persist in spending more than we take
in.

While
some debt does no harm and the ability to borrow is critical to any operation,
the growth in Federal debt is sobering, particularly when contrasted to the
growth in income – the nation’s GDP. From the bottom of the recession five
years ago, the annual compounded growth in GDP has been about 2.2%, while the
nation’s debt (since October 1, 2009) has compounded at 8%. These n umbers
actually understate the magnitude of the problem. Keep in mind, the starting
point for calculating the growth in debt was at an abnormally high level, as
the credit crisis and the Obama stimulus had ballooned the nation’s debt in
fiscal 2009 by $1.7 trillion, or 17%. At the same time, the starting point for
calculating the growth in GDP was at an abnormally low point – one quarter off
the bottom of the recession. Regardless, this is not a new problem. Since 1981,
U.S. federal debt has compounded at 9%, while GDP has expanded at an annual
compounded rate of 5.3%.The difference
this time is that borrowing has not produced comparable economic growth.

For
individuals and businesses there are only two options regarding debt: pay it
off or default. The Federal government has two other options, the second of
which is not available to states or local governments: make the debt perpetual,
or inflate. In recent times, the Federal government has never paid off debt, and
they have never defaulted. But they have taken advantage of the third and
fourth option. Not only has debt been perpetual, it keeps growing, and the
Dollar has depreciated. Inflation, at least as calculated by the Bureau of
Labor Statistics, has been modest, but for those who food shop, pump their own
gas and pay for a college education, inflation has not been so benign. The cost
of the run-up in Federal and state debt has not been really felt, because the
Federal Reserve has been purchasing T-Bills, T-Bonds and mortgages, keeping
interest rates at exceptionally low levels. At some point, though, tapering
will morph into total cessation of purchases.

It
is not the debt ceiling that is the problem, it is the spending. If the
Administration truly believes that people want a government that provides
cradle-to-grave subsistence, they should be honest about it and explain that
doing so will mean across-the-board tax increases on the order of 30-50%.
Entitlement spending is already limiting our ability to maintain our
infrastructure as Vice President Biden so vividly noted last week at LaGuardia.
Entitlement spending is crowding out military spending, with potentially frightening
consequences. Europe, the model Mr. Obama seems desirous of emulating, has had
the advantage for the past seventy years of a muscular friend in the United
States, to help provide for their defense (as well as a market for their exports.)
We have no such friend. And, of course, our debt does not include unfunded
liabilities for programs like Social Security, Medicare, Medicaid, welfare
assistance and now ObamaCare.

While
sympathetic to the fiscal goals of those like Senator Cruz, I disagree with his
tactics. Neither Mr. Boehner nor Mr. McConnell were happy to vote to raise the debt
ceiling, but they did what they had to do; so that the November Congressional
battles can focus on the lies and disingenuous statements that have come to characterize
this Administration, the poor planning and execution of ObamaCare and the
dismal economic recovery that Mr. Obama and his cohorts in the Congress have presided
over, and not on truculent Republicans tilting at windmills. They did what they
did for the good of the Party.

Wednesday, February 12, 2014

Having
just finished Willa Cather’s evocative novel, Death Comes to the Archbishop,
I have been thinking of how much the world has changed, not just in the past
ten years, but over the past two hundred years, since the start of the
industrial revolution.

Cather’s
principal character Jean Marie Latour is loosely based on Jean Lamy who was
sent by the Catholic Church to Santa Fe in 1850 from France to establish an
episcopacy in what was U.S. territory acquired from Mexico following the
Mexican War of 1846-48. Lamy served as Bishop and then Archbishop for 32 years,
from 1853 to 1885. In reading Cather’s novel, I was struck by the great
distances Latour had to travel – 60 miles to Albuquerque, 135 miles to Taos,
500 miles to Tucson and 700 miles to San Antonio. He traveled the 1400 miles to
Mexico City to assume his responsibilities. And he traveled by mule, at least
during his first two decades. By the time he died, railroads had arrived.

Traveling
great distances, either alone or with one or two companions, provided a lot of
time for thinking, something our current world rarely allows. Very few people
would want to return to a time when it took two or three days to travel by mule
between Santa Fe and Albuquerque, but the condensing of distances, which reduces
the opportunity for reflection, may lead to ill-considered, spontaneous comments,
the consequences of which may prove embarrassing.

A
Twitter account fits neatly into a world suffering from attention deficit
hyperactivity disorder (ADHD). An article a year ago in the New York Times
noted that there had been a 41% increase in the diagnosis of ADHD over the past
decade. It is unclear, from what I have read, as to why the increase. Some suggest
that a greater awareness of the symptom has increased the number of diagnoses.
A few cynics blame it on the drug companies who sell chemicals designed to
combat ADHD. Others argue that parents bear responsibility. They have become so
focused on getting their children into the right college that they keep them involved
in continuous activities. And some say that a proliferation of instant communication
devices and apps are responsible. Whether Twitter, Facebook, YouTube, Gmail and
Flickr are causes or consequences of ADHD, tweeting provides a perfect outlet.

A Kansas
State University study referenced by Lucy Kellaway in Tuesday’s Financial
Times noted that that the average U.S. employee spends 60-80% of his or her
work time online doing things unrelated to their job. We cyberloaf. We have
become, according to one pundit, “mentally obese.”

As
a marketing tool, tweets make sense. For anyone who relies on fame for their
livelihood, such as entertainers, authors, artists and bloggers, self-promotion
is easier because of tweeting. It is understandable that Twitter accounts are
used by retailers to send ads directly to consumers – much like instant-messaging
or e-mail, but faster and more focused. Most Twitter accounts – and there are
241 million of them according to Twitter’s recent results – are used to pass on
what I would call drivel, mindless information, like what kind of café latté
one is drinking at Starbucks, or what one is preparing for dinner. There is a
sense of paranoia among many of the young, of being isolated from friends and
acquaintances. Being constantly connected drives these people.

It
is understandable why Ellen DeGeneres uses Twitter, but I find it odd and
disconcerting that politicians like President Obama do. People don’t take
seriously tweets from Ms. DeGeneres, but they do from Mr. Obama. In fact
pundits and columnists will dissect all 140 characters each time he tweets. They
look for hidden meanings in the words. If there is a slip, like “…you can keep
your doctor…” or “…not a smidgeon of corruption…,” it will be around the
internet before he can put his i-Phone back in his pocket.

It
is revealing of our culture to look at who has the most Twitter followers. Pop
singer Katy Perry tops the list with just over 50 million. Just behind her is
Justin Bieber with 49 million. Virtually tied for third are President Obama and
Lady Gaga. Mr. Obama stands alone amidst this group of singer-entertainers. The
rest of the top ten include Taylor Swift, Britney Spears, Rihanna, Justin
Timberlake and the like. Mr. Obama’s Twitter account is actually handled by his
principal political action committee, Organization for Action. Indicative as to
how well they have played this game, the only other politicians with more than a
million followers are Arnold Schwarzenegger with 2.9 million and Sarah Palin
with just over a million. Fidel Castro, with 430 thousand followers, has almost
twice as many as Vice President Joe Biden.

In
thinking of the celebrity status provided Barack Obama, the George W. Bush
years – less than six years in the past – seem as dated as the Eisenhower era.
One of my sons recently signed on as a follower of President Obama and then
tried to do the same with former President Bush, but no such person was found.

One
of the more telling contrasts that speaks volumes about the age in which we
live is seeing a video tweet from Britain’s Prime Minister David Cameron. It
shows him posed in a butcher shop, picking up lamb chops, as he will, he says,
“be cooking dinner for my mum tonight.” Compare that attempt by an Oxbridge
toff to appear normal, to ex-Prime Minister Margaret Thatcher’s refusal to jump
for a Swedish interviewer in 1995. Jumping, according to interviewer Stina
Dabrowski, makes one appear normal. Mrs. Thatcher says there is no reason to “appear”
normal, when she already is. Mrs. Thatcher said she does not want to lose the
respect of the people who have respected her for years. (The interview can be
seen by Googling Thatcher and “don’t want to jump.” It is worth viewing, if
nothing more than to understand why a woman of her character, integrity and
intelligence is so sorely missed in this era of celebrities.) Margaret Thatcher
retains her dignity, while David Cameron comes across looking exactly like a
toff pretending to be something he is not. He looks like an idiot. She looks
like a Prime Minister.

Like
selfies, tweets encompass a strong narcissistic streak, something understandable
when used for commercial purposes, but unseemly when substituted for political
discourse. When asked about her posing for selfies with Barack Obama and David
Cameron, Danish Prime Minister Helle Thorning-Schmidt remarked she was a
serious person, but enjoyed having fun. That’s fair, but public figures largely
lose their right to privacy when they assume official positions. The repercussions
of actions that would be deemed harmless for private citizens can have
unintended consequences when taken by public figures.

We
will never return to the age of sail, long train rides, or the riding of mules
across vast and empty deserts, but politicians (and all of us) need time for
reflection. Tweets are more than a distraction; they convey, when used by
politicians, an absence of seriousness regarding a world that requires
thoughtful and serious leaders.

Monday, February 10, 2014

We
spend hours in trivial pursuit and too little time on meaningful issues. At a
time when 47 million Americans are on food stamps, 10.4 million people are
unemployed, our nation’s debt has been growing exponentially and stateless
terrorists are stalking people around the globe, we are fixated on ensuring
that the Little Sisters of the Poor can receive morning after pills, folks in
Colorado can smoke marijuana and those in New York cannot sip 20 ounce soft
drinks. We worry about issues over which we have little control, like spotted
owls and polar icecaps, while ignoring complex issues like understanding what
it means, in a civil society, to live freely, under the rule of law. We want to
please everyone and, consequently, too often please no one. Leaders in politics
and the media concentrate on issues that divide us, rather than on those that
unite us.

At
the same time, we forget how insignificant we are and how large the world is. And
we pay too little attention to the remarkable chain of events that had to occur
in order that we might be here. The mathematical odds against any one of us
being born are overwhelming. We are lucky to live in this age and even more
fortunate to live in a free country.

Every
person is unique, yet we all come from the same place – out of Africa. While no
one knows how many left Africa and over what time periods, the consensus
believes our ancestors left in waves, beginning more than 60,000 years ago. From
those common ancestors was born the human race, as we know it. Given an average
life span of eighty or so years, 60,000 years is a long time, but for an earth
that is 4.5 billion years old, 60,000 years barely registers.

Ancestry
is fascinating and history is more meaningful when we associate it with a
parent, grandparent or great-grandparent. For example, President William Howard
Taft is not widely remembered, but was President when my father was born in
1910. Ulysses Grant was President in 1873 when my paternal grandfather was born
and Martin Van Buren was President at his father’s birth, in 1837, just over a
hundred years before my own birth.

When
we look at our lineage through the lens of compounded returns we reach the
inevitable conclusion that we are all related. In a recent “Sunday Review”
section of the New York Times, A.J. Jacobs wrote of his estimated 75
million cousins, a group for which he admits not buying birthday gifts! While
his numbers sound far-fetched, they are not. We each have two parents, four
grandparents and eight great-grandparents. The number from whom we descend
doubles each generation, stretching back to the beginning of time. If we assume
three generations per century and go back to the time of the Norman Conquest,
or just under 1000 years ago, (and using the same mathematical exercise we
associate with Warren Buffett) each of us descends from 536,870,912 27-great
grandparents. The problem is that there are 7 billion of us today and there
were only 300 million in the year 1000AD, according to estimates by the UN
Department of Economic and Social Affairs. If we all descended from unique
ancestors the earth’s population would have been 3.5 quintillion in 1066. Obviously,
we are all related.

In
my family, we have been able to trace some of our ancestors. For example, my
siblings and I have at least one set of five-great grandparents common with
both my mother’s and father’s side. William Greenleaf was appointed Sheriff of Suffolk
County (Boston) in 1776 by the Provincial Congress. He and his wife, Mary
Brown, had fifteen children, two of whom died as infants with a third dying at
the age of 18. (The one who died at 18, Stephen, was a student of medicine and
surgery at Harvard and died of a fever contracted when working aboard a prison
ship in Boston harbor.) One daughter Priscilla married John Appleton, from whom
my father descended. A younger daughter Rebecca married Noah Webster, my
mother’s three-great grandfather. In all, the Greenleaf’s 12 surviving children
produced 85 grandchildren.

One
of my high school friends, Tom Korson, is also descended from the Greenleaf’s;
so he is my 6th cousin, something we never knew when at school. Sorry
Tom, but being a descendant of William Greenleaf is no big deal. A quick
calculation would estimate that his descendants, in the succeeding ten
generations, would number somewhere between half a million and five million –
and very possibly more. Intermarriages, childhood diseases and the Civil War
may have reduced those numbers, while larger families than I assumed would have
increased them. Whatever the number, great, great, great, great great-grandpa
Greenleaf would not be able to pick me out of a line-up, and he is only
marginally important in my life, as he was simply one of 128 five-great
grandparents I have.

As
an indication of the power of compounded returns when it comes to families and
descendants, I was asked about 25 years ago by a friend who was involved with
the Mayflower Society of New York if I might hazard how many people living in
New York State could trace their heritage to the Mayflower. Taking what I
assumed was a wildly bullish guess, I said about 100,000. He told me that the
Society’s estimate was seven million, or a third of the population of the
State. I was flabbergasted until I started doing the math. There were 102
passengers plus a crew of 20 on the Mayflower. About half died the first winter.
The remaining crew sailed for England in the spring. The rest stayed. Because
of the laws of compounding, the numbers become very big when we go back 14 or
so generations. Assume that 35 of the survivors had children. Further assume
that for the first four generations each had four surviving children, the next
five generations had three and the last four had two children. Those calculations
would produce 34,836,480 in 14 generations – a lower estimate than that
produced by the Mayflower Society in the 1980s. If one assumed that my grandparents’
and my parents’ generation had three surviving children, there would be
78,383,080 Mayflower descendants, or more than 20% of the U.S. population. Conclusion:
Despite pretensions to the contrary, there is nothing very exclusive about the
Mayflower Society.

Regardless
of our mixed heritage, politicians like to place us in discrete compartments:
Hispanic-Americans, Asian-Americans or African Americans, for example. But that
is misleading. We are not Blacks, Caucasians, Asians or Latinos. We are
Americans. We are segregated for political purposes. And politicians do it not
just by race, but by creed, gender, age, sexual orientation and now by wealth
and income. Doing so is divisive and serves no purpose, other than political
expediency.

Pride
in one’s nominal heritage is understandable and should be celebrated. Parades
and festivities like St. Patrick’s Day, Puerto Rican, Jewish and Greek heritage
days are an important part of our culture. Nevertheless, we should never forget
we are all members of the human race and we Americans are citizens of a great
nation whose melting pot reflects the commonality of our ancestry.

In
the late 1950s and early 1960s, during the Civil Rights movement, my paternal
grandmother – a woman who spent six years at MIT – told me that at some future
time all humans would be of one color. Racial differences, she believed, would
disappear. She is right, but “eventually” is a long a time. Politics should be
color-blind today. Politicians (and much of the media) divide us because they
find it more convenient to address the specific needs of a discrete group.
Doing so makes for expedient political advantage. It avoids having to discuss the
broader issues of what it would mean to live in a society where freedom is
suppressed. Ideas are far more important than physical characteristics or
personal preferences. It is the ability to think and to reason that
differentiates us from other animals. The concept of liberty, the rule of law,
the role of religion in society and the meaning of justice are the issues we
should be debating. And, we should never stop doing so.

While
unanimity in what we have in common as member of the human race is good,
unanimity in ideas suggests a population that has stopped thinking for itself –
the Eloi of H.G. Wells’ Time Machine. A gridlocked Congress encourages
blame. And blame substitutes for debate. There is a tendency among the media,
and with many politicians, to look upon failure to enact legislation as a negative
manifestation of our political system. It is not. People operating in free
markets do things. Governments set the boundaries and act as referee.

The
critical element of a democracy is the ability to express one’s opinions. A
society that freely debates issues is open. A society that condemns specific groups,
or vilifies others is closed. It is on the differences in political
philosophies that our discourse should be focused, not on the color of our
skin, our gender, religion or the country from which our ancestors hailed. After
all, we are kin.